Boost In Takeout Financing To Spur Infrastructure Financing, But Not Project Execution

CFW View: The MoU signed by the three state financing institutions on takeout financing will address a crucial deficiency in India, and common in emerging markets domestic banking and project finance sector, of the asset liability mismatch in debt and deposits maturities. BMI maintains its view that the takeout financing scheme is essential for the successful implementation of India's 12th Five-Year Plan (2012/13- 2016/17) due to near-term inflationary threats and the lack of sophistication in the country's financial markets. However, we also point to our view of the trap of moral hazard associated with secured, state-driven financing.

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